Wilson Sonsini To Adopt Performance-Based Bonuses
It is still way too early to get hard numbers on what Biglaw bonuses will look like for 2008. But because of the economic downturn, we expect it will be a rocky bonus season.
As readers of The Shock Doctrine will note, it is important to be aware of fundamental changes to the way bonuses are paid out. You don't want something to slip in under the guise of a (massive) market correction.
Yesterday, Wilson Sonsini Goodrich & Rosati announced that 50% of their bonuses would be paid out based on performance evaluations. According to the firm, the change was made in response to associates' concerns:
To: All Wilson Sonsini Goodrich & Rosati Associates, Of Counsel, Special Counsel, and Staff Attorneys
From: John Roos
Date: September 25, 2008
Re: FY09 Associate Bonus ProgramAs always, the firm is committed to providing a competitive compensation package to our associates. We also are committed to listening to feedback from our associates and making adjustments to our approach to compensation as appropriate. Recently, the firm's associates have voiced concerns about the bonus program's heavy emphasis on billable hours. In response to those concerns and after a long and careful review of the associate bonus program, we're pleased to announce a new component to the bonus program focused on qualitative performance factors.
[Redacted] will be sending out a memo shortly with more details on the changes, but I'd like to give you a brief rundown on the changes, as well as the process that led to them. In essence, the total bonus opportunity will consist of three independent components:
-- a basic level of bonus paid at 1,900 hours;
-- an adder paid at 2,100 hours; and
-- a variable bonus based on work quality and overall contribution to the firm.You'll note that the new bonus program allows us to continue to reward high-billing associates for their hard work--a factor that many associates pressed us to maintain--but it also allows us to reward those who are exceptional performers in other ways.
More from the memo, including explanation of the qualitative bonus component, after the jump.
The memo on Wilson Sonsini's 2008 bonus policy continues:
The new qualitative bonus component will be based on a number of factors, including productivity, quality of work, level of efficiency, business-development efforts, client-relations skills, and other practice-development considerations--the same factors that form the basis of our annual performance review process. Most significantly, bonus decisions will be determined by the members in the practice groups, putting the ability to reward exceptional work in the hands of those best equipped to gauge performance. We expect that this new approach also will generate more candid and substantial feedback from members on their associates' performance, something that many associates have requested.As I mentioned earlier, these changes were arrived at only after a long and thoughtful process, with a great deal of input from a number of key constituencies. In April, we formed an Associate Bonus Program Steering Committee, composed of members, associates, and administrative management. The steering committee met on a biweekly basis to hone its overall approach and goals, define performance criteria, and solicit and respond to recommendations. In addition to these meetings, they met regularly with the Associates Committee and other associate groups, as well as with many members, to ensure that a wide range of voices from all of the firm's offices and practices had a chance to be heard.
We recognize that any change in compensation structure is bound to raise questions, and we will address those in an upcoming town hall meeting. We'd also like to use the meeting as an opportunity to provide a general update on the firm. Additional details will follow shortly.
In closing, we would like to thank all the members of the Associate Bonus Program Steering Committee and everyone else who provided input on this issue. We hope that our associates will be pleased with the flexibility of the new bonus program and how it rewards exceptional performance as well as billable hours.
Sounds like the members of the "Associate Bonus Program Steering Committee" hosed their constituents.
The Wilson Sonsini associates did receive the promised clarification of their new bonus structure:
To: All Wilson Sonsini Goodrich & Rosati Associates, Of Counsel, Special Counsel, and Staff Attorneys
From: [Redacted]
Date: September 25, 2008
Re: FY09 Associate Bonus ProgramAs John Roos announced earlier today, the firm has made a number of changes to its associate bonus program and is introducing a new component focused on the firm's existing qualitative performance factors. These changes apply to all full-time and part-time associates, Of Counsel, Special Counsel, and staff attorneys in all offices.
You will recall that last year we relied on a formula that determined bonuses on a sliding scale between 1,800 and 2,000 hours. This year, we have made some fundamental changes, and in January 2009, according to the regular timetable for announcing the bonus pool based on the firm's financial performance, we will publish a chart explaining the amounts of the bonus opportunity for each class year. At this time, however, we would like to share with you that the total bonus opportunity will consist of three independent components:
-- a basic level of bonus paid at 1,900 hours (roughly 25% of the bonus opportunity);
-- an adder paid at 2,100 hours (roughly 25% of the bonus opportunity); and
-- a variable bonus based on work quality and overall contribution to the firm (up to roughly 50% of the bonus opportunity).For the purpose of determining the first two bonus components, eligible hours include all chargeable hours recorded, pro bono hours, hours charged to accounts for WSGR legal services, and a cumulative total of up to 40 hours charged to Knowledge Management, Attorney Recruiting interviews, or preparing and presenting internal training courses that qualify for CLE credit. The third bonus component will be based on a number of factors that already form the basis of our annual performance review process, including work quality, productivity, efficiency, business development, client relations, and other considerations regarding practice development.
As John mentioned, we realize that our associates are bound to have questions about the new bonus structure, and we have scheduled a town hall meeting for October 1 to explain the program.
In the meantime, please feel free to contact your supervising member if you have any questions about the changes to the associate bonus program.
Thank you.
This tipster best sums up what Wilson Sonsini associates are feeling:
The firm now has an easy way to screw associates out of half their bonus. Fantastic. Again, thanks for springing this on us 8 months into the year. I love how they spin this as reacting to associate concerns... unreal.
Pretty much. Fifty percent of the bonus is now based on a subjective review with no clear standards. Sound fair?
Maybe performance reviews are fair, but you need to give the associates more to work with than "other considerations regarding practice development." It would also be helpful to tell associates that their reviews actually mean something before three-quarters of the year is already in the books.
But in this economy, who knows. Putting half of the bonus into the nebulous "performance" category may just be the tip of the iceberg.
Keep your head on a swivel. It'll be a very interesting fourth quarter.
(72) Comments
First - woo hoo!
who mentions pretzels is a moron . . . except for me.
"Sound like the "Associate Bonus Program Steering Committee" hosed their constituents. "
Please proofread for subject-verb agreement.
In theory, this is fantastic. Performance based pay is how business runs, and law firms should do the same thing. In practice, greedy partners will likely just screw associates. There should be some policy that if an associate receives at least some bare minimum quantitative score on performance reviews, they won't come out worse than if they just hit their hours. Performance based should be a way to reward those who do great work but don't kill themselves hitting hours or working slow to fill time, as well as those who hit their hours but are real superstar performers. What are the chances of that happening though, particularly in this market.
Get a life, 3. Jesus H Christ, when did this blog become an exercise in which wanker can proof read the best. These are not memos or briefs, they're posts. Or their posts. Or there posts. Or hell, even thair posts. Do you cringe reading that? BFD, no one cares, you douche!
This blog may yet remain interesting if people care to chime in on the substance of the posts (when they don't suck). If you wankers want to proof read so bad, go ask for more work and leave the rest of us alone.
"It would also be helpful to tell associates that they're reviews..."
FYI - their, there, and they're... all have different usage.
6. see 5.
town hall?
While I'm not a huge fan of having no guidance for "standards" for the evaluation, the concept here is a good one--many firms (including mine) peg bonuses entirely to meeting billable hour targets. This means that inefficient associate who regularly takes 10 hours to do something that should take 1 hour gets a bigger bonus than associate who gets it done quickly. This should minimize that effect.
4 - chances are good that top performers that are well-liked will get large bonuses. There will be a bonus pool to spread around; so, I don't think "greedy partners" come into play. As for the size of the bonus pool - that is another matter.
chicken fingers?
This is similar to the way that Kirkland handles bonuses.
I wonder how they whack up the pool of cash across practice groups? Might just be a recipe for entire groups to get snubbed. Associates don't make bonuses because partners in their practice group don't have the pull to get a nice slice of pie. All followed by the entire group leaving.
Given that law firms usually require a number of different practice areas to truly serve clients, this sort of bonus structure could be detrimental to a firm.
A nice thing about lock-step is that you don't have recruits worrying about ending up in a marginalized (but necessary) practice group because they think they won't get the same bonus as the next guy. Of course you also don't get the same politics, internal jostling and general competitiveness that, while beneficial in many business environments, do not necessarily work in all law firms.
And before people start whinging about how stupid lock-step compensation is, take a look at the most profitable firms and notice that, with few exceptions, they pay lock-step.
The Steering Committee didn't hose its (not their) constituents, it transitioned from a system that rewards slave labor and mindless hours-hoarding to an efficiency-based model. We should all be so lucky.
The firm's income is still based on how many hours the associates bill. I bet the associates who get good reviews are going to be the ones billing the most hours, not doing work the most efficiently. In the end, it'll still be bonus by hours.
The Steering Committee didn't hose its (not their) constituents, it transitioned from a system that rewards slave labor and mindless hours-hoarding to an efficiency-based model. We should all be so lucky.
This hurts, Elie. I'd rather change my views than agree with you.
"Maybe performance reviews are fair, but you need to give the associates more to work with than "other considerations regarding practice development.""
Great selective quotation. The memo listed criteria and said they're "the same factors that form the basis of our annual performance review process."
"It would also be helpful to tell associates that they're reviews actually mean something before 3/4ths of the year is already in the books."
And who's the brilliant associate who doubts that reviews "actually mean something" in a bad economy?
"the nebulous 'performance' category"
What is this--a parody of Naomi Klein and labor rights language?
If you want to help, try a little more reporting and a little less transparent ideological fervor.
Wait... did the memo say they shifted the bonus range from 1800-2000 hours last year to 1900-2100 this year? Seems to be some hosing there.
The big question is this: assume a "typical" bonus payout of 100%. Assume Associate bills 2100 hours. If Associate is a star performer, does that Associate get 100%, or 125%? If 100%, then the comments are correct - this may be a way to pay less to poorer performers. (In this economy, be happy you still have a job if you're a poorer performer, by the way). If 125% to top performers, then it's a way to keep star associates in hot practice areas from leaving. Should be interesting.
#15 is probably right -- the determination will still be based on hours in most cases. Since the sliding scale for bonuses was apparently between 1800-2000 for WSGR associates previously, this seems like a way for the partners to expect more from associates and pay less. I love how they say they are responding to associate concerns, while at the same time totally screwing them over.
Wow. This is transparently a way to screw almost everyone but ass-kissing favorites out of 50% of their bonuses. Not to mention bumping the minimum up by 100 hours right as we hit a slow period so that people can't possibly make it up by end of year. This is so typical of management - if you're going to f--k the associates, why not just be up front about it? Trying to be sly in such a hamfisted way just insults our intelligence while you're screwing us.
This is how Baker & McNuggets handled bonuses, at least a few years back when I was there. I totally agree with the quote from the WSGR associate that this is a way for the firm to screw associates on up to 50% of the bonus. I got dinged an unknown amount for walking out of a "sensitivity training" session to attend a scheduled conference call - the fiscal year after it happened. This is going to cause a lot of controversy come bonus time, and once the market picks up a lot of associates who feel slighted will start to look around.
I'm at WSGR, and it's true that this was driven by the associates. We've been pushing for this for a long time, and it was sorely needed, if implemented correctly.
The fact is, performance based bonuses are especially needed at WSGR. No one wants to admit it, but WSGR has very uneven quality in the associate ranks, particularly outside of Palo Alto (like New York). For ever "star performer" there is a "village idiot," and both are outnumbered by run-of-the-mill drones. WSGR has been losing their star performers and high-billers for several years, and even those who stay for a shot at the brass ring feel screwed over and exploited. The firm needs a way to single them out. We just can't run a Cravath lock-step model when there is so much variance in quality and hours.
Plus, WSGR has the odd situation of a few specialty and VC groups that work a fair amount, but don't log a lot of billable hours. They need to be evaluated in a different way.
The big challenge for WSGR is implementation. WSGR is comprised of a hundred little silos and fiefdoms. The partners from different groups rarely talk to each other or share associates, so it will be a challenge for them to come up with objective review standards. Plus, some groups can offer their associates far more challenging work than others.
WSGR has had a review system in place for years, but it was a joke. All associates in years 1-4 got the same grade. And just about every senior associates received the highest grade. The only year they ever took seriously was the 5th year, where only 50-55% received the top grade, which was supposed to be the signal if you are on track.
As an ex-WSGR associate, I was on the associates committee and discussed changes to the bonus structure. On the transactional side, WSGR's business revolves around the corporate practice; all the support groups (employment, tax, estate planning and real estate/env) receive their work from corporate. When corporate is slow, corporate keeps any work, which they would otherwise give to these "support groups". (Maybe, corporate will research a tax or employment issue or review a real estate lease themselves b/c they need the hours.) So, in the end, the support groups cannot possibly meet the 2100 hour threshold to get 100% bonus. As a result, I believe WSGR tried to make the bonus structure less about hours, so compensate for the support groups, which may be billing less hours. Many associates were upset last year b/c the threshold to earn 100% bonus switched from 1900 to 2100 mid-year; management tried to correct this when bonuses came out, but it left a bad taste in everyone's mouth.
What % are actually on track to hit those hours? 5?
Commentor 4 is spot on. I'll add that performance evaluations that factor things other than billable hours are not standardized. WSGR tacitly acknowledges that fact by still linking it's bonus to hours billed. So called quality can be extremely nebulous. The person evaluating the associates' work is variable, i.e. the evaluator may be an asshole. Work done between associates is not standard. What a corporate associate does is very different than what a litigator does. The only fair standard is the number of hours they bill.
But forget all that. Law firm management is doing this to spend less in bonuses and pocket the difference to stop the bleeding they expect in PPP. They wouldn't implement a system that would increase their costs in this economy. Next year WSGR's total bonus pot will shrink significantly. The PPP may go down, but the lower bonuses will mitigate the hit in compensation the partners expect to take. Hey, they own the business, but it's low of them to shit on associates and tell them what a good thing it is to be shat upon. And for those grammar whores- I apologize for not knowing whether the past tense of shit is shitted or shat.
This is what happens when you choose the Dark Side and become paduwan to Darth Larry.
What is Wilson Sonsini?
If the purpose is as stated in the memo, to reward those who don't hit hours but otherwise contribute, then this doens't do it. It just now makes it harder for associates hitting hours to get the full bonus. Why not make it where you get the full bonus if you hit 2100, but can get upto 75% if you dont' hit 2100 but otherwise contribute? They may have listened to associate concerns, but hosed up the execution. This still doens't address the main concerns of rewarding high billers over 2100, as it seems there is still a fixed amount you can get, based on the quantitative criteria for 50%, and the vague and subjective 50%. Of course, the list of factors in the subjective portion inclucdes "productivity," so perhaps now you can't get the full bonus unless you are in the insane hour range. Not very pleased.
Performance-based bonuses are fine in theory -- it's how they're implemented that could be unfair. Only time will tell. In many firms, performance-based bonuses could easily become a popularity contest. I used to work for a firm that paid out discretionary bonuses on top of the lock-step hours-based bonus system. There was no consistency in how the discretionary bonuses were awarded -- it seemed like in essence you needed a partner to argue that you deserved one. If you did work for a particularly outspoken or powerful partner, you were substantially more likely to get the extra bonus. I know plenty of good associated who were shafted and plenty of crappy associates who were rewarded.
If there is a way for a firm to avoid that type of scenario, performance-based bonuses are fine. I think the only way to do that is for the performance reviews to be more honest. Maybe a 1-5 grading system that determines your bonus -- each partner you work for could give you a number, and you're final score would be the average. Essentially, you have to make sure that bonuses are not determined by a bunch of lawyers getting together in a room and talking -- then, only the powerful partners have a say, and that leads to inequities.
They didn't really up the hours, and may have even lowered it.
For many years WSGR gave a full merit bonus at 1900 (which pro-rated down to 25% at 1700), plus the firm gave additional dollars for every hour worked over 2100 (through the quarterly hours-based bonuses).
In June of last year they scrapped they replaced the quarterly bonuses with an annual hours bonus (up to 2400), and announced they were going to a 1900-2100 bonus range. Since they announced it mid-year, they decided to implement only half of the hours hike for an interim range of 1800-2000 hours.
This year the are holding to the 1900-2100 hour range, but they are taking away the incentive to go for 2400+. Now you only get money over 2100 if you did good work. Who knows whether they will really give extra money to those who fall in the 1900-2100 range.
I think the move to a merit based bonus structure is a step in the right direction. The old bonus system rewarded the moron that overbilled his/her clients (or worse, the senior associate that spends 12 hrs a day doing diligence because they are too dumb to do anything substantive). As noted, there is a wide range in the quality of associate.
Unfortunately, like everything at WSGR, I'm afraid that this will turn into a turf war among partners, and the bonuses granted will have only a loose correlation to the actual performance of the associate.
. . . on the up side, at least we'll get better bonuses than the associates at Heller
I should have gone to dental school.
I agree that top performing associates should be rewarded, but I would wager that, for the most part, the partners are going to use hours as a proxy for performance anyway. Also, are associates in groups that are very busy going to be happy when associates in much less busy groups get bigger bonuses than them for less work because a partner in their group has a different standard of quality than another group? Plus, whatever the case, you can't get the full bonus unless you hit 2100 hours, so whatever you say about quality, this does seem to be a way to up the hours requirement for the bonus. Why not just keep the 1800-2000 scale for 50% of the bonus and make the remainder a "quality" bonus. I have worked at firms with both types of structures (objective and subjective). The very top performers at the firm with subjective bonuses seem to make what the run-of-the-mill associates make at firms with objective (hours) standards. I don't know if that is just a coincidence, but it seems to be that once subjectivity is injected, transparency goes down, and partners can more easily get away with paying less. It will be interesting to see how this works out for the folks at WSGR.
I think this bonus structure makes the most sense, after many years of considering a way to improve my own firm's system.
You have to reward people for making their hours and for billing an even higher number of hours, but that should not be the end of it. Let's face it, sometimes it's easier for certain practice groups to make their hours and sometimes certain hours are easier than others (5 hours of doc review vs. 5 hours of negotiating a document).
Therefore, you add in merit and performance to help out that final performance element. This way you can reward people who couldn't make hours for reasons that aren't under their control, you recognize talent where there may not be as much "quantitiy", and you recognize that better performers should be paid more.
I think all bonuses should work this way. If you simply hit 2,100, it should count for something, but not everything. Kudos to WSGR.
OK, this may have the added benefit of rewarding associates in groups that can't make hours for "reasons that aren't under their control," but then, again, why not keep the current structure for part of the bonus and make another part subjective? Seems like, in addition to making this change that associates have been asking for, they are lumping in a higher requirement for the objective part of the bonus.
One curious thing to see will be if the aggregate bonus pool changes. In the past there was a fixed bonus pool for all associates that was divided according to the old structure.
If the total bonus pool stays the same, but is just distributed differently, then I'm OK with the new structure (despite its flaws).
If this is just another way for WSGR to screw the associate, I'm quitting (I hear Heller is hiring).
OK, this may have the added benefit of rewarding associates in groups that can't make hours for "reasons that aren't under their control," but then, again, why not keep the current structure for part of the bonus and make another part subjective? Seems like, in addition to making this change that associates have been asking for, they are lumping in a higher requirement for the objective part of the bonus.
I can't believe they get a full bonus at 1900. At WilmerHale (even in NYC), they issued a memo earlier this year stating that 2000 hours is expected for associates to get a bonus. And, they say they will dock the bonus for people who are late with their time entry. Maybe they'll be more generous than that, but I can't imagine why they would be.
I can't believe they get a full bonus at 1900. At WilmerHale (even in NYC), they issued a memo earlier this year stating that 2000 hours is expected for associates to get a bonus. And, they say they will dock the bonus for people who are late with their time entry. Maybe they'll be more generous than that, but I can't imagine why they would be.
This would never happen at Cravath.
One curious thing to see will be if the aggregate bonus pool changes. In the past there was a fixed bonus pool for all associates that was divided according to the old structure.
If the total bonus pool stays the same, but is just distributed differently, then I'm OK with the new structure (despite its flaws).
If this is just another way for WSGR to screw the associate, I'm quitting (I hear Heller is hiring).
#39/#40 -- they currently don't get the full bonus until they hit 2,000 hours. Under the new structure, they will have to hit 2,100 hours to get a full bonus.
The more I think about this policy, the more I think that it is terrible. Even if the purpose behind it is to make sure that efficiency and quality work is rewarded (which serves clients better), it fails to do that. Associates still have the incentive to hoard hours and, if need be, take their time getting things done to make 2100 hours, but also have to jump over another "do they like me" hurdle. A strictly merit based bonus (that took hours worked into consideration) would have been better.
WSGR associates don't get a full bonus at 1900 hours, #39. Learn how to read.
Also, this isn't made clear in the memo, but WSGR raised the bonus thresholds for partial and full bonuses last year to 1900 and 2100 hours, respectively. Because they did it in the middle of the year without any warning, the associates went nuts and the firm finally caved at the end of the year and went to the 1800/2000 scale.
The firm hadn't promised that it would apply anything other than the 1900/2100 scale prior to the end of the year, so it probably only went to 1800/2000 after figuring out that its costs of doing so were minimal (and certainly did so only after knowing that it had enjoyed a good year financially).
I don't know why, but WSGR loves to do all these things mid-year and to apply them retroactively.
Also, note that WSGR screwed all of its Seattle associates last year. All offices except Seattle (except for NY, which was already at $160k) got raises in base salary to $160k, and the firm raised hours thresholds for all bonuses as a result.
Seattle didn't get the raise in its base salary, but did get a 200-hour increase in its bonus thresholds (across the board).
If you want a good laugh, try to imagine the firm's CEO telling you with a straight face that no increase in base pay or bonus (and, in fact, a likely cut in the bonus pool due to the firm paying higher base salaries to all other associates in the firm), but needing to bill 200 more hours to get both a partial and a full bonus, is not a pay cut.
On day 1 (and for years before that), you bill 1900 hours and get $145k base and a full bonus. On day 2, you bill 1900 hours and get $145k base and about 40% of a bonus. Oh, and on day 2 they also cut "quarterly bonuses," which were about a grand or so if you were above 500 hours in a given quarter. But no, none of these are a pay cut. Yeah, okay.
WSGR's associates in Seattle didn't need to imagine it, because it really happened to them ... they got hosed.
By the way, no associates were really asking for this ... the firm's CEO was the one driving this. Under the old system, they had H2, H3, and E ratings ... H3 and E got 100% of the bonus and H2 got nothing. Almost nobody got an H2 rating ... it's like flunking a class in law school on a C curve.
So if you billed 1900 hours, you got the full bonus unless you were one of the 1% who got an H2 rating.
So, in the space of one year, they've gone from everyone who bills 1900 hours and isn't a total loser getting a full bonus to a system in which you get 25% at 1900, 25% at 2100, and 50% divvied up in some kind of performance rating system that nobody understands and that will be applied retroactively.
No upside, all downside. The associates weren't really asking for this.
Last year, Howrey got blasted for moving over to a merit based system. Now, the commenters seem to be more in favor of it. Is it because this system only applies to bonuses? Or is it because the economy hasn't gotten so bad, merit based iniatives are more acceptable now?
This policy is sneaky... how unfair that the new policy has been announced way too late for associates to ramp up their hours to hit the new higher target by year-end, this in a year where hours are hard to get anyway.
This policy is sneaky... how unfair that the new policy has been announced way too late for associates to ramp up their hours to hit the new higher target by year-end, this in a year where hours are increasingly hard to get.
This policy is sneaky... how unfair that the new policy has been announced way too late for associates to ramp up their hours to hit the new higher target by year-end, this in a year where hours are increasingly hard to get.
As someone else mentioned, for those who hit the 2100 hours, this new policy has NOTHING but downside associated with it.
Firms need to set a new bell curve in these days of low billables.
so why come up with a new system that does nothing but offer downside to higher billers?
3: Elie is not necessarily wrong. The Brits have a greater tendency to employ plural verb forms with collective nouns, but Americans can too. See: http://en.wikipedia.org/wiki/American_and_British_English_differences#Nouns , especially the example "the team takes their seats."
In short, if Elie wanted to emphasize the committee members' individual screwings-over, the sentence was correct. A more likely explanation, however, is ignorance.
As an ex-WSGR associate who left for greener pastures, I will give there firm it's due. There is nothing sneaky or unexpected about this policy.
In June of 2007 they told everyone they were going to a 1900-2100 hours scale for a merit bonus. They only phased in half of the hike last year (due to near associate revolt), given the mid-year implementation. There is no associate who can claim to be surprised this year.
Next, this isn't performance based pay. It continues to be lock-step salary, and half of the bonus is straight hours lock step. The only issue is how they allocate the other half of the bonus pool, but they will allocate it--meaning this isn't a device to keep the money for themselves.
And in all fairness to WSGR, there are not very many peer firms that require fewer hours for full bonuses. And please don't throw out the rogue example of the single Skadden or STB associate that got a monster bonus at 1800 hours, when the rest of the firm averages 2500.
Also, the firm isn't doing this to save money. They bonus pool will remain the same share of firm profits, it just gives them a little more discretion on how to allocate 50% of the pool. It won't be completely hours driven, but I will bet you that most of the "discretionary" pool will follow hours. They will want to reward the hard workers, and there is some amount of truth to the proposition that, over the long-term, the busiest associates are the go-to associates. My guess is that WSGR will use about 10 to 15% of the discretionary pool to reward stars that fall short of 2100, and they will want to share some love with the pipeline line groups that are not built for high hours, such as the ones that attract new VC clients.
55 got it right.
For 50/51, this doesn't automatically hurt high billers, and may even remove the incentive to kill yourself for a real bonus.
I'm sure they will use the discretionary funds to take care of the high billers. Realistically, Partners will probably receive little resistance if they push to reward their profit centers. Doing otherwise would go against the grain.
The real "turf war" will break out when partners fight for limited dollars to reward their low-to-medium billers. I have no idea how all these partners (who don't know each other) will agree that their 1950 associate is more deserving than any of the 180 other 1950 associates. The firm isn't built for this kind of review and evaluation structure, at least not the corporate side of the shop.
Hey 45 - Learn to read before asking others to do the same! Douchebag. 43 was responding to 39/40/s comment.
#55, just because the move isn't totally unexpected doesn't mean people shouldn't be upset about the change. It would seem that for most associates at WSGR, this is not a positive move -- and springing it most of the way through the year sucks. Perhaps what you are saying about the bonus pool is true and it will remain the same (though distributed a little differently -- maybe even more fairly). Perhaps WSGR should say that -- that the amount for bonuses will be determined upfront and in the same manner as before, but then the $ will be distributed in the new manner. Maybe that would keep people from feeling that this is a way of paying out less in bonuses.
57, you're a moron -- 45 addressed a point to 39 explicitly. Not sure why you're implying that he/she is referring to 43.
So yes, there are four different post numbers for you to keep track of, which could prove difficult since one was too much for you ... try to keep up, Corky.
You can't have a lock-step hours-based bonus system, its an oxymoron.
This is a minimum billables bonus system with two tiers and a potential "merit" kicker.
I work at WSGR and I actually think that they did a great job trying to come up with a hybrid system that provided recognition for quality as well as quantity. Clearly people who review documents in litigation for 2400 hours should get a bonus for all those additional hours. But shouldn't a senior associate who puts in 1900 hours and is considered a top performer in terms of quality ALSO be eligible for something more than just a token crumb?
My overall experience with the attorneys here has been positive in terms of quality of work. However, the environment can be fairly cut-throat.
I'm sure a bonus system that entails subjective criteria tied to dollars will really help to change that cut-throat behavior. Now instead of cutting throats for billables, people will be cutting throats to get closer to those who have some swing in the bonus decision. That place is going to be a serious mess in a year.
61 - you think it's cut-throat now, wait till you see what the competition to be the star performer with full bonus will do.
55 -- "Also, the firm isn't doing this to save money. They bonus pool will remain the same share of firm profits, it just gives them a little more discretion on how to allocate 50% of the pool."
Don't be so sure. There are credible rumors circulating that WSGR's PPP will be down by 10% or more and the firm is planning to de-equitize more partners. WSGR hired a bunch of lateral partners last year with multi-year guaranteed packages (smaller pie and more slices), so the firm is looking at all options to save money. I expect the associates will bear their pound of flesh (or more).
64, PPP is going to be down 10% at a lot of places. Or certainly mid-high single digits.
For 58, there are not a lot of people who object to this. I am on the associates committee, and there was barely a dissenting voice to the general proposition of using merit, rather than just hours, to assign up to half of the bonus. The associates have been pushing for something in this direction since June 2007.
And for others, there are no surprises here to this rather empty/meaningless announcement. In June 2007 they announced the new hours requirement, and they confirmed it at the beginning of this year. In February of this year (when bonuses were paid out), they also said they will work to develop a new bonus system that takes merit into account (b/c they were getting reamed for following just on hours). It was always expected that the firm would announce the new system in late Summer, before the review period starts.
And just to beat a dead horse, I know of no one on the associates committee who objected to removing the hard-line formula that only rewarded high hours, and introducing a merit component to redistribute some of the dollars for people who do great work with less hours. Most firms do that anyway, and WSGR is just catching up.
With all that said, I fully expect there to be complaints about implementation. Here are a few:
- How is the firm going to assess quality/merit across groups and offices? It's a challenge for any firm, but especially WSGR. Partners and associates work almost exclusively in their little groups, with little to no cross staffing. This will be the first time the firm tries using objective firm-wide review criteria. It will be interesting to see if the partners play along.
- Realistically, I expect the firm to abandon the idea of objective firm-wide criteria, at least initially. Instead, Roos will cut the discretionary bonus pool into 30 pieces, and tell the group heads to divy it up. In that case, the partners will fight over the size of their slice -- because the slices won't be equal in size. Hard working associates may lose out in the process if they find themselves with an unpopular partner (or one who wont' fight for a bigger slice). The real concern here is whether specialty groups and VC groups (that are built to bill a lot) will get a fair shake, because their contribution to the firm does not show immediately in revenues.
- The New York associates should be quaking in their boots. Last year they got special bonuses irrespective of their review grade. Plus they were several hundred hours below the firm average. And it's not just because work was slow in NY. Partners were regularly bumping NY associates from projects for better ones on the West Coast and DC. Under any real merit based system, they should get nothing. But the firm won't do that, because it would kill recruiting. As a result, the review standards will be dumbed down, which defies merit-based logic.
For 64, I share your skeptical view of the world, but this change isn't a trick to save money. WSGR funds a base bonus pool throughout the year, then the firm adds in a little more depending on profitability, firm billables, etc. It's a set formula, that has nothing to do with how the bonus money is divided up. This announcement is only about how to divide it up.
Wilson needs to come up with a formula that lets associates know the baseline for getting a full market bonus. Otherwise, it's just a way for the firm to screw associates over.
I work at K&E where merit is a component. All associates are rated on a 1-10 scale. In order to obtain a full market bonus, you must be rated "with class" in addition to hitting average hours. If you are rated below class, you get nothing. If you are rated above, you get more. The system works very well.
The system works for K&E because you've had it in place for years. You've had a settled rating scale for a while, people know what those scores mean in terms of performance, and the partners have been going through the grading exercise for years. And from that, well-settled expectations and standards evolve.
WSGR has none of that. They need to build the infrastructure first. It doesn't strike me as all that hard, but it will take a few years of feeling out.
I have to say, given the current economic climate and news about Heller, I would not be particularly inclined to grouse about the size of my bonus. I appreciate being employed.
70, these sentiments will really work to the favor of Bay Area firms.
Every year New York firms go first with their bonuses in Oct/Nov. I have to think the NYC bonuses will be tiny this year, since they are bearing the brunt of the problems.
The national & DC firms go a little after that, and it's usually bad news, that gets ridiculed a bit.
Then the Bay area firms seem to announce last, in February, by which time, they'll know exactly where they have to go to stay with the pack. This year, the Bay area firms can go really low, and they won't take any hits for it. In fact, people may well be thankful.
66, you may not have heard any concerns raised because every associate at WSGR I know sees the Associates Committee at WSGR as an ineffective group.
Last year or the year before, I contacted an Associates Committee member with various concerns and was ignored. The Seattle office didn't even have a rep on the compensation subcommittee working on this new bonus scheme - nobody thought about it, apparently - until very late in the process, and even then its representative seemed resigned to John pushing this bonus structure change forward.
Last fall, after noting that DLA offered higher comp than us in Seattle, some of the associates worked to draft a memo regarding comp and related issues, and addressed it to John and Stacey directly. It was ignored, even though we had heard various platitudes from John last fall about making sure that we remained at the top of the market.
Additionally, as someone else noted above, management apparently doesn't think that being required to bill 200 more hours in order to get a bonus is a pay cut. Questions and concerns about that point have .... you guessed it ..... been ignored. It is difficult to raise issues when you're dealing with that level of contempt for the associates.
So, you may not have heard anything about unhappiness with this new bonus structure, but that might just be because the committee is viewed as ineffectual, especially in regards to regional offices, and because concerns are never addressed in a constructive manner.
Rather than contacting AC reps with concerns, we just wait for an email announcing some new way in which we lose out. We do wait in excitement for the "town hall meeting," though, so we can be invited to raise additional concerns that will be ignored.